Exchange rate misalignment and external imbalances: What is the optimal monetary policy response?

• 成果类型: Article
• 署名作者: Corsetti, Giancarlo; Dedola, Luca; Leduc, Sylvain
• 署名单位: European University Institute; European Central Bank; Federal Reserve System - USA; Federal Reserve Bank - San Francisco
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2023.103771
• 发表日期: 2023
• 关键词: Currency misalignment; Trade imbalances; Asset markets and risk sharing; Optimal targeting rules; International policy cooperation; exchange rate pass-through

摘要

How should monetary policy respond to excessive capital inflows that appreciate the currency and widen the external deficit? Using the workhorse open-macro model, we derive a quadratic approximation of the utility-based global loss function in incomplete market economies, and solve for the optimal targeting rules under cooperation. The optimal monetary stance is expansionary if the exchange rate pass-through (ERPT) on import prices is complete, contractionary if nominal rigidities attenuate ERPT. Excessive capital inflows, however, may lead to currency undervaluation instead of overvaluation for some parameter values. The optimal stance is then invariably expansionary to support domestic demand.& COPY; 2023 Elsevier B.V. All rights reserved.